MARKET FEASIBILITY STUDY FOR PROPOSED HOTEL DEVELOPMENT HOTEL XXXX XXXXXXXX XXXXXXX LANGKAWI PREPARED BY: MOHRIN JONID XYZ CONSULT SDN. BHD. March 10, 2009
March 10, 2009
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En Xxxxxxxx Xxxxxxx Bin Xxxxxxxxxxx Zenx Hotel and Management Sdn Bhd Langkawi Kedah darul Aman RE: MARKET FEASIBILITY STUDY FOR PROPOSED HOTEL DEVELOPMENT IN LANGKAWI Dear En Xxxxxxxxxxxxx, 1.
We have completed our study of the potential market demand and have prepared statements of estimated annual operating results for the proposed development of Hotel Seri Malaysia Perdana Langkawi, Kedah Darul Aman.
2.
As in all studies of this type, the estimated results are based upon competent and efficient management and presume no significant change in the competitive position in the lodging industry in the immediate area from that as set forth in this report. The conclusions reached are based upon our knowledge of the subject lodging market and the proposed project as of the conclusion of our research and fieldwork on February 28, 2009. They are also based on our evaluation of the present and previous year's economy for the region and do not take into account or make provision for the effect of any sharp rise or decline in the economic conditions not presently foreseeable. To the extent that wages and other operating expenses may advance over the economic life of the property, we expect that prices of rooms and other services will be adjusted, at least to offset such advances.
3.
The terms of our engagement are such that we have no obligation to revise this report or the estimated annual operating results to reflect events or conditions, which occur subsequent to the date of the completion of our fieldwork. However, we are available to discuss the necessity for revision in view of changes in the economic or market factors affecting the proposed project.
4.
It is expressly understood that the scope of this study and the report thereon does not include the possible impact of Local Authority and Federal regulations, licensing requirements, or other restrictions concerning the proposed property except where such matters have been brought to our attention and are set forth in this report.
5.
Since the estimated operating results are based on estimates and assumptions, which are subject to uncertainty and variation, we do not represent them as results that will actually be achieved. This report has been prepared for your use and guidance in determining the feasibility of the
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proposed project in relation to its costs and for possible use in securing primary mortgage financing. 6.
Neither our name, nor the material submitted may be included in prospectus, or used in offerings or representations in connection with the sale of securities or participation of interests to the public, without the express written permission of AS2 Consult Sdn Bhd.
7.
We would be pleased to hear from you if we can be of further assistance in the interpretation and application of our findings and conclusions.
Yours sincerely, Mohrin Jonid For XYZ Consult Sdn Bhd
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TABLE OF CONTENTS PAGE EXECUTIVE SUMMARY ................................................................................. 5 SECTION I: INTRODUCTION ........................................................................
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SECTION II: AREA REVIEW Overview ......................................................................................... Economic Indicators ......................................................................... Transportation ................................................................................. Tourism ........................................................................................... Relationship to Demand Generators ...................................................
12 12 14 15 17
SECTION III: SUPPLY AND DEMAND ANALYSIS Competitive Hotel Supply ................................................................... 18 Competitive Set ................................................................................. 19 Historical Performance of Competitive Supply ...................................... 21 Seasonality ........................................................................................ 22 Segmentation of Hotel Rooms' Demand ............................................... 22 Demand Descriptions .......................................................................... 23 Summary of Demand Growth and Market Occupancies .......................... 24 SECTION IV: SITE SELECTION ASSESSMENT Site Evaluation ....................................................................................
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Executive Summary PROPOSED HOTEL HOTEL XXXX XXXXXXXX XXXXXXX LANGKAWI MARCH 10, 2009
Executive Summary 1.
Based upon information and data collected during the fieldwork phase of our study, and subsequent research and analyses, we are of the opinion that
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there is sufficient market demand to support the construction of a new 305room, 3-4 star rated hotel on the island of Langkawi. This recommendation is based on our analysis of market characteristics, the area hotel supply and demand, the amenities offered by the competitive hotels, and the targeted clientele of the subject hotel. 2.
We evaluated the site based on access, visibility, and relationship to demand generators as well as discussions with representatives from local government organizations, commercial operations, and tourism organizations.
3.
Generally, hotel development is located less than 2 Km from the main town of Kuah, near major area attractions, governmnet offices and corporations, with a large population base. The proposed site in particular, surrounded with an empty land, has a huge potential to become the next major satellite town and retail center in Langkawi.
4.
Our conclusions relating to the estimated market performance of the subject hotel and market feasibility of the proposed project are based on the following factors: a.
An opening date of January 1, 2010 has been assumed for the proposed project.
b.
We have based our estimates of operating results on the assumption that the hotel will be a full service property positioned among the top of the local market in terms of product quality and service levels. Additionally, the property will include the following facilities and amenities: -
201 x Standard rooms (28sq. m) 98 x Family rooms (32sq. m) 4 x Deluxe rooms (48sq. m) 2 x Suite rooms ( 64sq. m) 5 meeting rooms of 603sq. m each in size which could accommodate 50-60 people Approximately 1,765sq. m. of divisible banquet space A full service restaurant serving three meals Room Service Cocktail Lounge Complimentary in-room coffee Self service laundry facilities Safe deposit box at front desk Iron and ironing board Hairdryer In room broadband access Access to business services (printer and fax)
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5.
Newspaper delivered (daily) In room cable TV Shuttle service to popular beaches as needed Fitness/exercise facilities Swimming pool 20,000 sq. m. of Duty Free Shopping Archade
Economic indicators for Langkawi project a positive outlook for strong economic growth in the region. Although, as said by the Minister Of Tuorism of Malaysia, as reported by BERNAMA dated February 19, 2009, that the tourism numbers to fall 9.3 percent to 20 million in 2009, from 22.05 million in 2008, The Minister stop short of commenting the outlook for the year 2010, the year when this project were to be completed. She further added that RM400 million has been proposed for a stimulus package to be spent on tourism. Langkawi was declared the 52nd Unesco World Geopark on June 1, 2007 and now known as Langkawi GEOPARK. This declaration promotes the island throughout the world. In addition to being a sister to Zigong GEOPARK of China, ( source: Thestar April 5, 2008), Langkawi Geopark will host the fourth biennial UNESCO International Conference on Geoparks in 2010 (source: Thestar June 28, 2008).
6.
We examined the existing competitive market in relation to the proposed hotel and developed a profile of your proposed project. Based on criteria such as location, proximity to public meeting/conference space, number of available guest rooms, food and beverage facilities, published rates, market orientation and amenities, we have deemed this primary market to be most competitive with the proposed hotel. Between 2004 and 2007, occupancy levels at the hotels in Kedah steadily increasing from 58.8% in 2004 to 60.2% in 2005. In 2006, the occupancy rate was set at 58.6 due to global economic climate but shot up to 64.6% in 2007 (Source: Tourism Ministry)
7.
New residential and commercial development plans by the local authority, LADA, should attract increased demand to the market. A large 20,000 square feet of duty free shopping archade and boutique shops planned at the ground floor of the proposed project is likely to attract an additional demand to the market. Overall market is expected to stabilise at an average occupancy of approximately 50% by the end of 2010 and 61% in 2011 by the same time period.
8.
The primary segments generating hotel demand in the subject market area include Commercial individual (FIT corporate), Group Ad-Hoc, Group Series, Government FIT and tour and travel. We estimate that the proposed hotel
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should be well positioned to capture its fair share of the leisure, corporate and group markets. Due to the proposed market orientation of the full-service hotel, it is likely to compete to some degree, for corporate business currently accommodated by default in some of the hotels located outside of the immediate subject market area. The following illustrates the segmentation assumptions used to calculate the Average Occupancy Rate (ARR). i. Commercial Individual (FIT) 35% ii. Group Ad-Hoc 27% iii. Group Series 15% iv. Government FIT 14% v. Tour and Travel 9% Estimated Representative Year Segmentation of Demand 9. Based on the aforementioned assumptions, we have also estimated an average Daily Room Rate RM130.00 and an occupancy rate of 62.0 percent for the 1st year (2010) of operation. 10.
The following tables summarize our estimates of operating results; Year
Average Occupancy Rate (AOR)
Average Daily Room Rate
2010
50%
RM135.00
2011
61%
RM136.35
2012
63%
RM137.71
Gross Operating Income On Room Sales RM7,514,437.5 0 RM9,259,289.8 9 RM9,658,256,4 2
Average % Of Total Revenue (Constant) 52.44% 52.44% 52.44%
Note: Hotel is expected to commence operation in February 2010 for a period of 11 months only
F Consulting
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SECTION I: INTRODUCTION PROPOSED HOTEL HOTEL XXXX XXXXXXXX XXXXXXX LANGKAWI MARCH 10, 2009
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Section I: Introduction PURPOSE AND SCOPE OF THE STUDY The purpose of this study is to determine the existing and potential market demand for the proposed new development of a full-service hotel to be in the district of Kuah, Pulau Langkawi, Kedah Darul Aman. In addition, on the basis of our findings, statements of estimated annual operating results for a representative year and the ensuing five full years of operation have been prepared. The scope of our study may be summarized as follows: -
Potential site analysis;
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Analysis of economic trends;
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Analysis of historical, current, and future supply of and demand for hotel rooms in the competitive market;
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Review of historical operations, capture rates, and average rate achievement of competitive properties;
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Development of estimates of occupancy levels that might be obtained at the proposed lodging facility;
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Development of estimates of average daily room rates, and;
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Development of statements of estimated annual operating results.
METHODOLOGY The market research included field work in the site area during which interviews were held with local public officials, representatives of competitive facilities, representatives of associations, corporations and other organizations, and persons familiar with development patterns and the local hotel market. Growth trends in demand were projected from various indicators and weighted against information regarding possible increases in supply that were deemed to be competitive with the proposed project. The projections of revenue, expenses and operating results were based on the results of interviews, consideration of the current scale of charges in the area, and
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the results of similar facilities as reported in statistical information compiled by XYZ CONSULT SDN. BHD.
SECTION II: AREA REVIEW PROPOSED HOTEL HOTEL XXXX XXXXXXXX XXXXXXX LANGKAWI MARCH 10, 2009
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Section II: Area Review OVERVIEW Area Review For the purpose of this study, XYZ CONSULT SDN. BHD. identified a proposed hotel development area that comprises the areas where major demand generators such as local commercial developments, tourist attraction points and tourism related destinations as well as the areas in the Peninsular of Malaysia. These areas were used to evaluate overall area growth trends of economic indicators such as the Geography, History, Population and Tourist Arrivals. In addition, AS2 CONSULT SDN BHD took into consideration the multiple access available to visitors to the island: i. ii.
By air By sea
It could be summarised that the main attractions to the area of the proposed hotel project which generate demand for the subject market are as follows: i.
Nature and Heritage
ii.
Free Duty island
ECONOMIC INDICATORS GEOGRAPHY (Source: Langkawi magazine) Langkawi situated just off the northwestern coast of Peninsular Malaysia, about 30 km from Kuala Perlis and 51 km from Kuala Kedah comprises a group of 104 tropical islands during the low tides and 99 Island during the high tides. The main island Langkawi, is 47. 848 Hectare followed by Pulau Dayang Bunting, Pulau Tuba while some of the others appear to be mere dots in the emerald green ocean when viewed from the air. Langkawi are richly blessed with a heritage of fabulous myths and legends: of ogres and gigantic birds, warriors and fairy princesses, battles and romance. Langkawi offers natural attractions unsurpassed by any other in the region. With a geological history dating back 500 million odd years, the islands contain unique rock formations that stir the imagination and baffle the mind. Numerous caves, with their stunning stalactites and stalagmites, taunt the adventurous and unravel their ancient secrets. Those who love a tropical island holiday and a place far from the maddening crowd
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will find their haven in Langkawi Island. The outstanding natural landscapes of the Langkawi Islands proclaim them a true tropical paradise. Fine beaches offer sunfilled days of complete relaxation. The clear, emerald waters around the islands provide a host of water sports and recreation and a magical world of marine life. Nestling amidst the mist-covered hills, limestone outcrops and lush forest are fascinating waterfalls that are host to other interesting fauna and flora would attract natural lovers. HISTORY (Source: Langkawi magazine) The name Langkawi is the last surviving place of the ancient kingdom of Lankasuka. Lankasuka whose capital is said to have stood at the base of Kedah Peak south of Alor Setar on the mainland, is mentioned in Chinese accounts of the area as far back as 500 AD. According to the Liang Dynasty records, the kingdom was founded in the first century when its Hindu king, Bagatta, paid tribute to the Chinese Emperor of the time. The names of its kings resurface time and again in Malay legends and fairytales. Local folklore has it that Langkawi derived its name from the eagle or "helang" as it is known in the Malay language. "Lang" for short and in old Malay, "kawi" denotes reddish brown; hence, Langkawi simply means reddish brown eagle. Langkawi steeped in legends was cursed by Princess Mahsuri who was condemned to death in 1355 for adultery. Her dying curse was that the island would remain barren for seven generations. Shortly afterwards Thais attacked Langkawi, razing all the settlements to the ground. Tourism took off in 1986 when Chinese dominated Penang lost its duty-free status to the then Malaysian backwater, Langkawi. Billions of ringgit has since poured into the area and the once sleepy fishing villages and endless paddy fields now harbors and resorts of world class standards. Most of the development is in the main town, Kuah and along isolated beaches on the west and northern coasts. Away from the built up areas, Langkawi is still fairly rural, though many of the paddy fields have now been left to wandering buffalo and are no longer cultivated due to there being more money to be made in tourism, for the local ex-farmers. The Langkawi you see today has been transformed almost beyond recognition. This is the legendary island is now major international businessmen meet to form new ventures and conclude deals whilst relaxing. Langkawi has now completed its seven generation cycle and seemingly, if all the development and prosperity now in so much evidence on the island, is anything to go by, the curse has finally been lifted CLIMATE (Source: Langkawi magazine) Situated at latitudes 6В°10'N to 6В°30'N and longitudes 99В°35'E to 100В°E, langkawi enjoys an Equatorial climate. Langkawi has a tropical monsoon climate with a high annual temperature of between 24В°C to 33В°C. There are 2 distinct seasons. The dry season, November to March, when the winds blow predominately from the NE, the weather is generally fine with nice sailing
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breeze but tends to be much dryer than other parts of Malaysia and temperatures on the whole average around 32В°. The wet season in Langkawi is around April to During the wet season, one can expect rain, although showers tend to be over very quickly. The winds at this time are predominately from the W/SW. Its annual rainfall is heavy at averages 2500mm (100 inches) and on rainy days, thunder and lightning often accompany the heavy downpour. The humidity level is high, at 80% through out the year. POPULATION (Source: Langkawi magazine) Langkawi has a multi-racial society with estimated population at about 60.000.There are 3 main races in Langkawi. The Malay, who are Muslims, form the majority of Langkawi population (90%). The other 2 main racial groups are Chinese, who are mostly Buddhist and the Indians who are mainly Hindus, others who make up the population including Thais, Eurasian and foreigner who decided to make Langkawi as their homes. TOURIST ARRIVALS (Source: LADA) Historically, statistics shows that tourist arrival steadily increasing, except in 2007 due to global economic uncertainties, from 1,835,287 in 2005 to 2,303,157 in 2008 as shown below: Year Arriva l
2005 1,835,287
TRANSPORTATION
2006 2,161,937
2007 2,334,362
2008 2,303,157
(Source: Langkawi magazine)
Air Transportation (Source: Langkawi magazine) Langkawi International Airport provides both direct and indirect flight from Penang, Kuala Lumpur, Singapore, UK, Japan and Taiwan with about 30 flights a day during peak season. 5 different airlines are currently plying the Island: i. ii. iii. iv. v.
Malaysia Airlines Malaysia Air Asia Singapore Silk Air Japan Airlines Taiwan Eva Air
Ferry Services (Source: Ferry Lines Ventures) There are also ferry services that runs between Langkawi island and the following points:
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i. ii. iii. iv.
Kuala Kedah, Malaysia Kuala Perlis, Malaysia Penang, Malaysia Satun, Thailand
There are 4 different ferry companies providing daily services from and to the above ports. In total, during peak period, the breakdown as follows: i.
Kuala Kedah port Fare (one way) Travelling time
-
10 trips daily RM23.00/RM17.00 for adult/child 1hr 15mins
ii.
Kuala Perlis port Fare (one way) Travelling time
-
9 trips daily RM18/RM13.00 for adult/child 45mins
iii.
Penang port Fare (one way) Travelling time
-
2 trips daily RM60.00/RM45.00 for adult/child 2hrs 30mins
iv.
Satun Fare (one way) Travelling time
-
3 trips daily RM30.00/RM23.00 for adult/child 1hr
TOURISM Tourism in Isle of Langkawi has shown an upward trend. the numerous international annual event only create more demand for the subject market. The following events create awareness to the global market: i. ii. iii. iv. v. iv.
BMW Royal Langkawi International Regatta Le Tour de Langkawi Ironman Langkawi Malaysia Triathlon Raja Muda Selangor International Regatta Langkawi International Maritime Aerospace Wilderness Langkawi Challenge
According to the Tourism Minister, Azalina Othman (thestar Feb 19, 2009), total traveler spending in 2007 was approximately RM14 billion in revenue from 21 Million tourist arrivals in Malaysia. At a constant rate, total tourist spending in Langkawi is therefore, based on 2,334,362 numbers of visitors, would sum up to approximately RM1.56 billion. Visitors to the area
(Source: LADA)
Region/Count ry
are mostly as follows:
Year 2005
Year 2006
Year 2007
Year 2008
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Malaysian ASEAN Eastern Asia Southern Asia Oceania Middle East Europe Africa The Americas Total
1,037,338 93285 138464 33402 47929 60632 375497 4479 44261
1,431,413 84091 133465 33678 44182 69122 330156 5656 30174
1,583,573 116090 130524 37587 46297 79701 299585 7322 33683
1,587,033 112770 124150 39542 48329 87666 267164 6543 29960
1,835,287
2,161,937
2,334,362
2,303,157
Major tourist attractions in the Isle of Langkawi are abundant and located in and around the island. This idyllic island is famous for its tales of giant birds, ogres, princes and princesses, and also for its age-old geological wonders of mysterious caves, mystical lakes and islands, and mist-shrouded mountains each with a timeless legend. Among the attraction and Places of Interest that would become Demand Generators are as follows: i.
Legend and Folklore; -
ii.
Places of Interest -
iii.
Mahsuri Mausoleum Of Clashing Clans, Pots and Pans Burnt Rice Field The Lake of the Pregnant Maiden Gua Langsir Fairies And Babies Telaga Tujuh
Ibrahim Hussein arts Center Ibrahim Hussein Foundations Museum Galeri Perdana UnderWater World Langkawi Crystal Crocodile Farm Air Hangat Village
Recreational Activities -
Golfing at Gunung raya Golf and Datai Golf Club Horse Riding Geo Park Tour Mangrove swamp and Limestone
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Beaches at Pantai Cenang, Teluk Datai, Pantai Kok and Pantai
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Sailing Biking and Jungle Trekking Scuba ang Snorkling Bird Watching Island Hopping Rainforest Canopy
Tengah
The list are endless. RELATIONSHIP TO DEMAND GENERATORS The major demand generators (attractions) within the Isle of Langkawi are scattered around the island. Although the exact site for the proposed hotel development is not located in close proximity to tourism attractions, this is in no way a hindrance of attracting demand. The proposed hotel project itself shall become a major demand generators with its Free Duty Shopping archade and large Pillarless Ballroom. The size of the island of Langkawi is only 47, 848 hectare thus driving to the furthest point on the island would take less than 20 minutes.
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SECTION III: SUPPLY AND DEMAND ANALYISIS PROPOSED HOTEL HOTEL XXXX XXXXXXXX XXXXXXX LANGKAWI MARCH 10, 2009
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Section III: Supply and Demand Analysis COMPETITIVE HOTEL SUPPLY In order to assess room night demand for the proposed hotel development, AS2 CONSULT SDN BHD identified a competitive set of properties in the proposed hotel development area based on published room rates, level of service, amenities and location. All hotels in the competitive set are considered primary competitors of the proposed development. The properties used in our analysis are listed in the table below and shown on the map on page III-8. Selected Competitive Set Properties N Properties Number Of o Available Rooms 1 City Bayview Hotel 282 2 Eagle Bay 128 3 Hotel Langkasuka 168 4 Langkawi Seaview 139 5 Hotel Helang 218 Source: AS2 Consult Sdn Bhd
Isle of Wight County, VA COMPETITIVE SET Following is a brief description of each property's amenities, location and probable market segmentation. City Bayview Hotel Located in the heart of the commercial district of Kuah town, 5 minutes from the jetty and only 25 minutes from the airport. It is at walking distance from the seafront and shopping area as well. The hotel is designed to accommodate the demands of both leisure and business travellers alike wih its understated luxury and amenities. The estimated market segmentation for this property is 55 percent business and 45 percent leisure. Eagle Bay The Eagle Bay Hotel is a 3 star hotel. It is situated in the heart of Kuah Town, Langkawi's town centre and only 2 minutes drive from Kuah Jetty and 25 minutes drive from Langkawi International Airport, within walking distance to all the duty 19
free shops, the Langkawi Fair shopping centre, many restaurants, Banks, tourist information centre, car rentals and taxis. Three of Langkawi's most prominent landmarks are right in front of the hotel like CHOGM Garden, Eagle Square and Lagenda Park with its long stretch of white, sandy beach. The budget hotel accommodates business travellers, families as well as budget travellers. The lobby is nicely decorated with Malaysian style handicrafts and some of the rooms also have Malaysian style features. They are well equipped with colour TV, IDD telephone, air-conditioning, pipe-in music, small refrigerator/mini-bar filled on request and the bathroom has a bathtub with shower head. A small outdoor spa swimming pool with swim jets that provides a body massage offers relaxation after a day of shopping or sight seeing. The estimated market segmentation for this property is 65 percent business and 35 percent leisure. Hotel Langkasuka The two star Hotel Langkasuka is located right in the heart of Kuah Town on the legendary Island of Langkawi. Conveniently located about 5 minutes from the Kuah Jetty and 30 minutes from the Airport it is easily reached by car within a short time. It is and inexpensive Hotel for businessman, leisure travellers, tourists and shoppers. Hotel Langkasuka are furnished in simple elegance with double or twin beds, for total comfort. The room facilities comprise of electronic keypad doors, colour television, IDD telephone and complementary coffee and tea making facilities. 24 hours security, a safe deposit box as well as free parking are also one of the advantages. The estimated market segmentation for this property is 45 percent business and 55 percent leisure. This property is not considered to be a primary competitors. Langkawi Seaview Hotel Located in Kuah Town only 5 minutes from Kuah Town with the Teluk Baru Ferry Jetty and 30 minutes drive from Langkawi International Airport the Langkawi Seaview Hotels is the ideal place for business travellers and tourists. Being in town Langkawi Seaview Hotel is within walking distance to all the major duty free shopping areas, the Langkawi Fair Shopping Centre and many smaller shops, souvenir markets and restaurants. The Hotel features rooms in different sizes and prize range. The hotel is the ideal choice with its low prices and a taste of luxury. Each of the rooms is furnished with double or King size beds, TV-set with in-house movies, individually controlled airconditioner and balcony. Most of the rooms have a beautiful view out to the sea, the Marina and the bay.
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A roofed swimming pool on the second floor with an attached pool Jacuzzi, surrounded by comfortable sun beds and big lush green flower pots, invites guest to relax and get a nice tan. The estimated market segmentation for this property is 60 percent business and 40 percent leisure.
Hotel Helang Ideally located within walking distance to the Langkawi International Airport and the Masuri International Exhibition Centre (MIEC). It is currently being Langkawi's premier convention hotel, features eight conference rooms of which one is suitable for 200 people complete with an extensive range of audio visual equipment for various kinds of events. The other meeting rooms come in different sizes to cater different businesses and functions. On an area of 71,400 square meters, the hotel and the MIEC which is within walking distance are able to cater up to 3,000 participants. It offers a beautiful swimming pool next to the restaurant terrace, a games room which provides pool table, dartboard and board games like Mahjong, Cyber Cafe with Internet as well as a private beach in the nearby sister hotel Langkasuka Beach Resort. The estimated market segmentation for this property is 68 percent business and 32 percent leisure. This property is being considered as the primary and major competitor to the proposed hotel development project Addition to Supply Based on our field research and interviews with local government officials, business and tourism organisations, there are no planned additions to supply within the masket drawing area at this time. HISTORICAL PERFORMANCE OF THE COMPETITIVE SUPPLY The aggregate average annual available and occupied rooms and resulting occupancy levels, for the competitive supply from 2005 to 2008 are presented in the following tables. Year
Annual Room Supply
2004 2005
-
Total Room Nights Occupied -
Annual Occupancy 58.8% 60.2%
(a) (a)
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2006 2007 2008 Notes:
6323 7385
4085 4793
(c) (c)
58.6% 64.6% 64.9%
(a) (a) (b)
(a) - Source - MOT (b) - Source - AS2 Consult S/B (c) - Source - LADA
Between 2005 and 2007, occupancy levels at the hotels in Kedah steadily increasing from 58.8% in 2004 to 60.2% in 2005. Please note that the occupancy rate for 2006 was set at only 58.6% due to global economic climate but shot up to 64.6% in 2007. As can be noted in the table above, total occupied rooms nights experienced only a slight increases from 2007 to 2008 with an annual growth rate of 0.03% but the addition to supply of rooms for the same period increased signifantly at 16.8%. This displays the attributed of demand in the market of the proposed project area. SEASONALITY AS2 Consult has analyzed the subject market to determine its seasonality with regard to room night demand. Based on information obtained during field research and statistics from LADA, the market experiences peaking of Foreign and International demand for the year 2008, during the months of January untill March and between June and August. The domestic demand peaks in the months of May, November and December and the lowest being in the months of January and September. Months
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Tota l
Foreign
11.4 % 5.9%
12.5 % 8.1%
11.2 % 8.5%
7.8%
6.2%
8.4%
9.9%
4.4
5.7
10.1 %
8.7%
5.5 % 3.8 %
5.4%
6.4%
11.5 % 6.7%
8.7%
9.3%
15.3 %
100 % 100 %
17.3 %
20.6 %
19.7 %
14.2 %
16.3 %
17.1 %
17.2 %
18.6 %
9.3 %
13.1 %
13.7 %
21.0 %
Domest ic Total
8.7%
In overall, total demand, except for the months of September, is almost always constantly available throughout the year, in-line with holidays and major events held on the island. SEGMENTATION OF HOTEL ROOMS' DEMAND Leisure Demand Leisure demand consists of families, couples, and individuals seeking vacation experiences including a weekend “get-away” or an experience that is different and
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unique when compared to their normal routine. Typically associated with vacationing, leisure demand can encompass anything from an overnight festival attendant to the extended vacationer. According to research conducted by the International Travel Industry Association, approximately 66 percent of all domestic travel in 1999 was leisurerelated. Seasonality is a major factor when attempting to attract the leisure traveler. Peak demand periods for the leisure traveler are expected during School Holidays, Public Holidays and Long week Ends, as shown in the table above. Typically, the months of January and September are slower periods for leisure demand. The proposed hotel will need to promote off-season recreation activities, packaging, and special events to entice leisure travel demand. This period will be associated with discounting in an effort to stimulate this demand. Commercial Individual Demand Commercial individual demand is generated by business people traveling to or through the area to complete some facet of business. This group typically is the least price sensitive of the demand segments in that they are usually reimbursed for their expenses. They include business representatives, corporate trainees, interviewees, sales representatives, contractors and any other business associated traveler. This segment is expected to represent a smaller portion of demand to the proposed property due to the non-presence of large corporations in the proposed hotel development area . Group Demand Group demand is generated by associations, government, and business groups, which hold meetings, corporate retreats/outings, and conferences. This segment includes groups (10 or more people) who reserve guestrooms typically with meeting/conference space, food and beverage. Expected sources of group demand include corporate groups, associations, non-profits, and a limited number of government groups. Research compiled by AS2 CONSULT S/B, indicate that group demand is most concentrated in the months of March, April, May and through November. The first 2 months of the year are usually somewhat slower for group demand due to the high incidence of vacations and the inability of groups to ensure participation by key individuals. Groups typically receive some of the lowest room rates offered as the result of volume purchasing. In addition, group demand peaks, as described above, occur during shoulder seasons, a period when properties begin to offer incentive discounting. DEMAND DESCRIPTIONS
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Interviews conducted with local government officials, tourism organizations, and area commercial establishments indicated that different variations of demand exist within the primary market area. In general, demand for hotel rooms can be categorized as demonstrated demand, induced demand, and unsatisfied demand. AS2 CONSULT S/B estimates that all three exist within the market area to certain degrees. Following is a brief description of each type of demand and how they relate to the subject property market: Demonstrated Demand: Demonstrated demand is demand that is already captured by the competitive hotels. Currently, the competitive supply captures demand from primarily two of the three segments previously mentioned: commercial individual and leisure. Commercial individual demand comes from the large demand generators as stated in the Demand Generators listing within and surround the area. Induced Demand: Induced demand is the demand that does not presently seek accommodations in the competitive market, but could be persuaded to do so as a result of increased market capacity through marketing efforts, room rates, facilities, services and amenities. AS2 CONSULT S/B estimates that there is potential to generate induced demand from all three segments (commercial, leisure, and group) with the leader being the group segment if the number of rooms increase in the subject market area. In addition to the demand generators already participating in the market, the hotel's large ballroom may prompt interest to use accommodations too. Unsatisfied Demand: Unsatisfied demand is the demand that seeks accommodations in the market but is not satisfied due to any one or more of a number of factors: sell-outs during peak season; lack of a particular type of accommodation; lack of meeting space; or high room rates. In the case of the subject market area, any unsatisfied demand is primarily a result of a limited number of a particular type of accommodations and lack of meeting space. An increase in market supply of full service guestrooms can facilitate the accommodation of this kind of demand. AS2 CONSULT S/B estimates that with the new proposed hotel development, unsatisfied demand for group room nights will increase as interest in the Seri Malaysia Hotel Chain increases. The induced demand as illustrated above will be forced to seek accommodations elsewhere or hold meetings in other areas due to the lack of rooms. The proposed hotel could focus its bookings on
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events that require limited overnight accommodations such as company holiday parties, large company meetings, and weddings. SUMMARY OF DEMAND GROWTH AND MARKET OCCUPANCIES For the purpose of this analysis, AS2 CONSULT S/B has projected demand growth and market occupancies to the current market supply with the the construction of a new, free standing, 305-room full service hotel. AS2 CONSULT S/B estimated that the addition to supply would accommodate some of the current unsatisfied demand and possibly generate induced demand. Using the historical growth in the market as a base, and taking into account the current demonstrated and projected economic conditions in 2010, we have estimated future growth in overall market demand as outlined in the tables below: Year
Available Rooms
Occupied Rooms
2010 2011 2012
101,870 111325 111325
35,685 67,908 70,135
Percentage Of Occupied Rooms 50.0% 61.0% 63.0%
Market Occupancy 64.9% 65.5% 66.1%
Note: Hotel is expected to commence operation in February 2010 for a period of 11 months only
Average daily rate is estimated to increase at levels approved by the Franchaisor, Rangkaian Hotel Seri Malaysia.
SECTION IV: SITE SELECTION ASSESSMENT PROPOSED HOTEL HOTEL XXXX XXXXXXXX XXXXXXX LANGKAWI MARCH 10, 2009
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Section IV: Site Selection Assessment SITE EVALUATION AS2 CONSULT S/B identified and concur that the site for the proposed hotel development show potential for development as illustrated by the map below. As mentioned previously, hotel properties are generally located near major demand generators such as the tourist attractions center. The area that was most comparable to this profile was Mutiara Damansara in Petaling Jaya. The site was evaluated based on potential for expansion, access, visibility, and relationship to demand generators.
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